Save money on childcare fees
The third article in this series looks at the benefits of salary-packaging your employer-provided childcare fees.

By Maria Cavallo

There are 22 Defence and Commonwealth childcare centres nation-wide that qualify as FBT-exempt, saving you money if you salary-package the fees paid for childcare.

Photo by Philip Liebelt

ONE OF the most convenient benefits for ADO members to package is the fees regularly paid for childcare expenses.

Childcare fees, where Defence or Commonwealth childcare centres provide the care, can be included in your salary package as the fees are exempt from Fringe Benefits Tax (FBT).

However, there is no benefit for ADO members to salary-package childcare fees where Defence or Commonwealth childcare centres do not provide the care, as these childcare fees are subject to the full rate of FBT (48.5 per cent).

There are 22 Defence and Commonwealth childcare centres nation-wide that qualify as FBT-exempt. A list of eligible childcare centres is available from the salary-packaging handbook that has been created with SmartSalary, the ADO’s salary-packaging administrator.

The handbook is on the SmartSalary web site, www.smartsalary.com.au. Once on the web site, you can access the area for ADO members by clicking the yellow login button and typing the employer code ADO.

So why salary-package employer-provided childcare fees? By including employer-provided childcare fees in your salary package, you may be able to significantly increase your effective take-home pay.

For example, an employee who spends $200 a week on childcare, earns $65,000 a year and does not receive government assistance due to family income tests will save around $4000 a year.

This is because childcare fees are paid from pre-tax dollars, rather than post-tax dollars.

Childcare fees that are paid direct to the childcare centre from your salary package every fortnight are not subject to tax, therefore you save the tax that you would have otherwise paid had you received your salary, paid income tax and then paid your childcare fees.

It is important to note that salary-packaging childcare is not financially effective for all people. ADO members with family income below certain thresholds may receive the Commonwealth Government’s childcare benefit. When salary packaging, this benefit would cease to be paid.

To assess which option will provide the greater benefit, the ADO recommends that you consult with your accountant or financial adviser. A list of ADO-approved financial advisers can also be found in the salary-packaging handbook located on the SmartSalary web site.

Should you require any further assistance on salary-packaging please contact the SmartSalary Customer Service Centre via email at ado@smartsalary.com.au or by phone on 1800 632 496.

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